AOL’s Activist Investors Say Armstrong’s Content Play Isn’t Working

Starboard Value LP, who’s 4.5 percent stake in AOL makes it one of the company’s largest shareholders, is taking aim at Tim Armstrong and his attempt to reinvent AOL as a media powerhouse.

In a nine page letter reviewed by the Wall Street Journal, Starboard points out that AOL has seen its stock slide 70% over the past year. The company may be positioning itself to get spots on AOL’s board of directors, with all eight seats up for re-election in February. 

The arguments are cutting. Starboard says that AOL is losing more than $500 million a year and that its current market cap of $1.4 billion basically values its media properties, including the recently purchased TechCruch and Huffington Post, at $0.

Starboard said that AOL’s value is now almost entirely dependent on it’s shrinking dial up business. As Bloomberg noted, Starboard has also singled out Patch.  “This valuation discrepancy is primarily due to the company’s massive operating losses in its display business, as well as continued concern over further acquisitions and investments into money-losing growth initiatives like Patch.”